Climate Controlled Self Storage Development

[Chris Cieslak]

Hey All.

Over the course of the last 9 months I have been working to develop my first self storage facility from scratch. It began with one night ferociously looking through properties and stumbling upon a 16,000sqft. building located in the 19th Ward of Rochester NY. I was unaware of what I would do with this structure at this point but for $134,000 figured I could re-purpose it somehow. I called my Realtor to schedule a showing and walked through, at this time the entire building was split into small offices with the biggest room being 1,000sqft. The building at this time was primarily vacant with several long term tenants whom were paying less than 1/5th of what they should be in addition all 16,000 feet were covered in wood paneling and outdated fixtures and in dire needs of updating.  I left and started thinking of different options for the property and eventually after several failed construction budgets and cash flow analysis I came upon self storage units this conceptually would work. 

The next day I put the property under contract with a very favorable purchase contract that allowed several options to extend for due diligence. I then began working with the City on getting the property re-zoned. This conceptually is a very easy thing to say but proved to be more difficult to do. Warning - Building and Zoning department offices aren't there to help you re-zone a property. They are there to make sure what your proposing is fitting to all city codes. This took me several tries. Eventually after several tries, a landscaping proposal, a history in the property from 1960's stating storage was in the building and lots of other leg work I received a conditional approval of a change in zoning from the existing C2 to S2. This though was not enough as I now had to get building code approval for my new zoning classification.... (When a new zoning is issued the building must comply with current building codes for that zoning classification not code from when the building was built or zoned previously).  It was now time to hire a architect to get building code approval. Now remember at this point I don't own the building, have spent hours and hours of time working to get it re-zoned and now have to engage an architect to tell me how the layout and other construction aspects that are necessary for the building to meet code so that a final c of o can be granted once construction is complete.

Once this was completed by the architect and I had stamped plans, I was able to submit these to the building department and get my building permit. In between these phases I decided to close on the building as well as the seller was going to walk and I had enough confidence in the project succeeding. 

I also began working on getting Bank Financing for a construction loan as I budgeted the project to cost $400k with the purchase of the building if everything went to plan. With my background in commercial lending I knew how to structure the deal and proposed a inflated construction budget to be on the safe side and was paying myself a management fee of 15% so my total budget cost was now looking like $525K as a total budget cost I was a little scared myself that it may end up costing this much, but knew if it was managed well It would succeed. The bank issued me a commitment letter for a construction loan for the lesser of $400K or 75% LTV of the "Upon Stabilizaiton" value of the property. My appraisal came in at $650K I at this point was very happy but based on my cash flow and projections with a cap rate of 10% was at $808K. So at this point it was all win win and the project was full steam ahead still.

Now it's March 1st and the loan has closed and we are a couple days into construction. I will give an update in several week's as more will be able to be shared. So far it's been a good experience and I want to build more of these and I have yet to collect my first rent.....the real estate adiction continues to get me.

- Chris

[Scott Meyers]

Hey Chris, 

This is my sandbox, and we LOVE to find existing warehouses/industrial buildings that can be repurposed for Self-Storage.  There's a reason why Self-Storage has the highest returns of ANY other form of real estate - bar none, and you've stumbled onto one of the reasons why; because the Numbers work! 

Enjoy the ride, it will be both fun and profitable my friend! 

Cheers,